Drug War Bloodshed Tarnishes Mexico's Richest City

Once an oasis of calm, Mexico's richest city has become a central battleground in the country's increasingly bloody drug war as cartels open fire on city streets and throw grenades onto busy highways.

Escalating violence in Monterrey, one of Latin America's most affluent cities and seen as a symbol of Mexico's economic prowess, is arguably the most dramatic development in Mexico's four-year campaign against powerful drug cartels.

Firefights are spilling into leafy suburbs, putting ordinary Mexicans and foreigners at risk and raising the stakes for President Felipe Calderon as he faces pressure to protect a city generating 8 percent of Mexico's gross domestic product.

"The violence is now impacting the economy. Supermarket projects and jewelry stores are just two areas of frozen investment," said Juan Ernesto Sandoval, the head of Monterrey's commerce, retail and tourism chamber.

Sandoval said over 60 percent of the chamber's member businesses had received extortion threats this year.

Companies are spending 5 percent of cash flow on security, a cost that was nonexistent just four years ago, while firms selling alarms, locks and cameras in Monterrey have seen a 20 percent jump in annual profits in three years, he said.

The violence in Monterrey, with its sleek U.S.-style highways, private universities and walled homes belonging to top businessmen, may do more to shape the response to Mexico's drug war than the years of steady bloodshed in places like Ciudad Juarez, the poor, desert factory city to the west.

Monterrey, 140 miles from the border with Texas, was chosen to host a U.N. conference on development in 2002 and was lauded by U.S. President George W. Bush as a model city.

Home to global cement maker Cemex, Latin America's top drinks maker FEMSA, and plants run by U.S. manufacturers including General Electric, Monterrey has Mexico's highest per-capita income.

The city's murder rate, at 27 deaths per 100,000 people in the first three months of this year, is still lower than San Antonio, Texas, one study found, and it remains far safer than such Mexican cities as Ciudad Juarez and Tijuana.

But business leaders in Mexico worry northern hubs like Monterrey could lose investment to Brazil, China or India.

"You can't bury your head in the sand and say that the insecurity doesn't affect factories and investment, you would be saying something that isn't real," Gerardo Gutierrez, head of one of Mexico's top business chambers, told reporters.

More than 650 people have died in drug violence in Monterrey and the surrounding state of Nuevo Leon this year as the Gulf cartel has battled its former armed wing, the Zetas.

The violence has touched many in a city that had long seen itself as protected from the bloodshed gripping other parts of Mexico. In August, two rival hitmen recognized one another at a supermarket checkout in a wealthy Monterrey suburb and began shooting. Shoppers panicked and one man had a heart attack.

Gunmen have hurled at least nine grenades in the past three weeks, including one thrown into a public square which injured 15 people as they strolled about and ate ice cream.

Concern hit a new high last week after hitmen shot into a crowd of people at a popular shopping area, killing a young woman and provoking an outburst by normally staid residents.

"So many people are talking about leaving, so many are fearful their kids will be the next innocent victims," said a lawyer, who gave her name as Norma, praying at a candle and flower tribute to the slain 21-year-old university student.

Public officials have also been targeted around Monterrey. Two mayors have been assassinated near the city since August.

"We're seeing a whole new phase in the violence that is taking a toll on society," said Jorge Aguirre, a political analyst at the University of Monterrey.

The government of Nuevo Leon has launched a $30 million publicity campaign across Mexico to polish Monterrey's image and Calderon sent more federal police to Monterrey in September, but has so far resisted calls to send in more troops.

"I think it's important that we continue (our fight), combating the criminals with all the power of the state," he said in a visit to Monterrey last month.

Foreign companies are not yet pulling out. One European diplomat said he was still receiving calls from companies wanting to set up plants to export to the United States.

But restaurants, shops and hotels say business is being scared off as locals stay home and as students, tourists and even artists who typically visit Monterrey think again.

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